What's really at stake when you apply for financing? Essentially two things:
- Whether you get approved for the financing or loan that you are seeking.
- The credit terms you receive, or put another way - how much interest you are charged. This is what could cost, or save you, thousands of dollars! So how do lenders make their decision on whether to approve your application and what terms to offer?
Basically, they rely on the information you provide to them, and in many cases, this may be limited to your personal information, banking and account information, and the information contained in your credit report, and your credit score.
Your credit score typically plays the largest role in the application process, and the terms you receive. It may only consist of three little numbers, but these three numbers, to lenders, reflect your level of risk. It pays to understand how the information in your credit report is used to determine your credit score. By knowing how lenders evaluate your credit score/risk level, you can be proactive and take steps to lower your risk, and help improve your credit standing.